Conygar Inv Regulatory News (CIC)

3 December 2013

THE CONYGAR INVESTMENT COMPANY PLC

PRELIMINARY RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2013

The Conygar Investment Company PLC, announces its results for the year ended 30 September 2013.

HIGHLIGHTS

· Net asset value per share increased by 5.2% to 174.6p (2012: 165.9p). EPRA NAV per share increased by 4.8% to 174.9p (2012: 166.9p).

· Pre-tax profit for the year £7.74 million compared with £7.46 million last year.

· Net debt of £38.9 million representing gearing of 25.1% against net asset value and 23.6% on loan to value basis.

· Share buy back: the Group acquired 4.3% of its ordinary share capital at a weighted average price of 96.8p per share.

· Total cash and undrawn committed facilities exceed £50 million.

· Investment property portfolio valuation up 2% in the second half of 2013 as property market outside of London shows signs of recovery.

· Obtained planning permission in respect of the 60,000 square foot Sainsbury's retail food store and 835 residential plots in Haverfordwest.

· Contracts exchanged with Marston's to sell 0.7 acres for a pub and restaurant at Pembroke Dock. Significant first step in post-planning phase of development.

· Obtained planning consent at Parc Cybi Business Park, Holyhead for a 200 space truck stop and logistics depot.

Summary Group Net Assets As At 30 September 2013

Robert Ware, Chief Executive, commented:

"Following the turbulent years since the financial crisis, there is now some cause for optimism, as there are definite signs of a recovery and improved market sentiment. This goodwill is beginning to extend outside London, which is benefitting our investment portfolio and we are definitely seeing an upturn in transactional activity, particularly at the occupier level. It is too early to predict the scale of the upturn, as any recovery remains fragile, but the last six months have seen an encouraging improvement.

Conygar remains well funded, cash generative and able to invest, so we are well positioned to take advantage of any market improvement. Our pipeline of development projects are also benefitting from this improved market sentiment and several of these projects are poised to start delivering on their potential.

We continue to grow net asset value per share and this growth should be enhanced further with progress in the development portfolio and as the anticipated recovery starts to take hold."

Enquiries:

The Conygar Investment Company PLC

Robert Ware: 020 7258 8670

Peter Batchelor: 020 7258 8670

Liberum Capital Limited (Nominated Adviser)

Chris Bowman: 020 3100 2000

Richard Bootle: 020 3100 2000

Tim Graham: 020 3100 2000

Temple Bar Advisory (Public Relations)

Alex Child-Villiers: 07795 425580

Chairman's & Chief Executive's Statement

Results

We are pleased to present the Group's results for the year ended 30 September 2013.

Net asset value per share increased by 5.2% to 174.6p from 165.9p last year and to 174.9 on an EPRA basis. The major components driving that growth are the profit after tax of £6.2 million and the share buy back programme which added 3 pence per share or 1.9%. The profit before taxation for the year was £7.7 million (2012: £7.5 million) with net property income of £12.9 million (2012: £13.4 million) before financing and overheads.

Net asset value as at 30 September 2013 was £155.1 million compared with £154.0 million at 30 September 2012. During the year, the Group spent £3.9 million on share buy backs and paid a dividend of £1.2 million and excluding these, net asset value increased by 4%.

The Group's investment properties as at 30 September 2013 were independently valued at £164.8 million (2012: £176.0 million), a flat valuation overall for the year on a like for like basis. However, having fallen by nearly 2% at 31 March 2013, we have seen a recovery in the second half of 2013 which reflects an improved sentiment towards property assets outside London and the South East.

The Group had cash balances of £31.6 million (2012: £31.5 million) at the year end and bank debt of £70.5 million (2012: £80.9 million) which is net gearing of 25.1% or 23.6% on a loan to value basis. The Group generates around £3.3 million pa cash from operations which funds development expenditure and capital expenditure on the investment property portfolio.

Progress

The business continued to make good progress during the year. Of particular note was the submission of the planning application for our development at Haverfordwest, Pembrokeshire to build 835 residential properties and a 60,000 square feet Sainsbury's retail food store. In September 2013, we were pleased to announce that the Council had resolved to grant planning permission which will be formally granted upon the signing of a section 106 agreement. This is a major hurdle cleared and we can now work upon the detail of finalising the infrastructure and associated conditions to enable the completion of the conditional sale of the 9 acre site to Sainsbury's. Whilst the final terms of that agreement must remain confidential, the Sainsbury's funds, once received, will enable us to complete all the infrastructure works on the entire site which will provide a catalyst for residential development on the remaining 84 acres.

In May 2013, we announced that conditional contracts had been exchanged with Marston's to sell 0.7 acres at Pembroke Dock for a family pub and restaurant. Aside from being the first step in the post-planning phase, this has also generated interest from other commercial and retail operators in the site. In addition, we have begun exploratory engineering works in the harbour which is another step towards construction.

At Parc Cybi Business Park, Holyhead, we have obtained planning consent for a 200 space truck stop with associated amenities and entered into an agreement with the Welsh Government for the grant of a 999 year lease over 14 developable acres for the truck stop, logistics depot and service units. We have also exercised an option to acquire a further 12 acres of land for which we have already acquired planning consent for 110,000 square feet of distribution warehousing and 30,000 square feet of offices and we are in talks with several potential occupiers. This is in no small way due to the proposed construction of the Wylfa B nuclear power station, which looks increasingly likely, following recent events regarding the construction of Hinkley Point.

Our other development projects all continue to progress and in particular, the developments at Holyhead Waterfront and Fishguard Waterfront, where the section 106 agreements are nearly finalised and discussions with various interested parties continue to move forward.

Overall, the development pipeline is now making excellent progress and whilst it has been frustrating at times, all our projects have obtained planning consents. Our careful approach means that expenditure to date is only £32.2 million and we are not committed to any speculative projects. We remain on course to deliver projects, comprising more than 2,000 residential units, 1,400 marina berths and in excess of 400,000 square feet of commercial and retail development. Our downside risk is managed whilst the upside potential is significant.

The Group's investment properties continue to progress albeit the valuation remained flat over the year. The commercial property market outside London appears to have recovered slightly with our year end valuation recovering the losses in the first half of 2013. It is a trend we hope will continue, whilst acknowledging that any recovery is still in its infancy.

The contracted annual rent roll is £14.4 million as at 30 September 2013, which is £1.4 million lower than at 30 September 2012, mainly owing to a number of disposals in the year. We continue to work hard at letting vacant space, retaining tenants and pushing down irrecoverable property costs. Our average unexpired lease length has risen slightly to 4.8 years, from 4.5 years at 30 September 2012, reflecting numerous lease renewals. The portfolio vacancy rate is 16.7% which is up from last year's 10.4%. This is disappointing but not unexpected. The main additional vacancy arises from expiring leases at Maidenhead and Worcester which were not renewed. However, several negotiations are in progress which will hopefully reduce this. We are also refurbishing some empty floors at Norfolk House, Birmingham which will create desirable space close to the New Street Station redevelopment. So, whilst vacancy rates will rise in the short term, we expect a reduction as the market recovers. We made six disposals in the year realising £12.7 million of net sales proceeds. All sales were approximately at valuation and we will continue to recycle assets to release capital for other opportunities.

Our investment property portfolio continues to generate surplus cash flow which helps fund the pipeline of development projects which should deliver strong returns in the medium term.

In April 2013, we secured a refinancing of our TOPP portfolio with an £11 million three year loan from The Royal Bank of Scotland. This completes our refinancing of the entire investment property portfolio begun in 2011. The market for real estate debt is still difficult, in particular for secondary assets outside London which require significant and active management, so we are pleased to have obtained good financing at reasonable rates with lenders with whom we have a long-standing relationship. We will continue to seek out good sources of finance.

At 30 September 2013, the Group had cash of £31.6 million available to pursue investment opportunities and in addition, the Group could draw down a further £20 million from our committed bank facility with Lloyds Banking Group. The business is well funded and the balance sheet healthy.

Dividend

The Board is pleased to recommend a final dividend of 1.5p per ordinary share in respect of the year ended 30 September 2013 to be paid on 13 February 2014 to shareholders on the register at 10 January 2014. This is an increase of 20% over last year. Our dividend policy remains unchanged with most profits retained for reinvestment in the business.

Share Buy Back

During the year, the Group acquired 4,009,838 ordinary shares representing 4.3% of its ordinary share capital, at a weighted average price of 96.8p per share. This cost approximately £3.9m and, as a result of the buy backs, net asset value per share has been enhanced by approximately 3 pence per share or 1.9%. The Group will seek to renew the buy back authority at the forthcoming AGM because, whilst our shares no longer trade at such a significant discount to underlying net asset value, we consider it to be a useful capital management tool which has been used to great advantage in the last few years. In total, the Group has acquired 34,567,819 shares at an average price of 107.0 pence per share since December 2010.

Outlook

Following the turbulent years since the financial crisis, there is now some cause for optimism, as there are definite signs of a recovery and improved market sentiment. This goodwill is beginning to extend outside London, which is benefitting our investment portfolio and we are definitely seeing an upturn in transactional activity, particularly at the occupier level. It is too early to predict the scale of the upturn as any recovery remains fragile but the last six months have seen an encouraging improvement.

Conygar remains well funded, cash generative and able to invest, so we are well positioned to take advantage of any market improvement. Our pipeline of development projects are also benefitting from this improved market sentiment and several of these projects are poised to start delivering on their potential.

We continue to grow net asset value per share and this growth should be enhanced further with progress in the development portfolio and as the anticipated recovery starts to take hold.

NJ Hamway R T E Ware

Chairman Chief Executive

Strategic Report

The Group Strategic Report provides a review of the entire business for the financial year; discusses the group financial position at the year end and explains the principal risks and uncertainties facing the business and how we manage those risks. We also outline the Group's business model and strategy.

Strategy and Business Model

Conygar is an AIM quoted property investment and development group dealing primarily in UK property. Our aim is to invest in property assets and companies where we can add significant value using our property management, development and transaction structuring skills.

The business operates two major strands being the property investment side and the development project side. The investment property portfolio generates surplus cash flow whilst at the same time we are creating a pipeline of exciting development projects that are well positioned to deliver good returns in the medium term. We focus upon positive cash flow and will utilise modest levels of gearing to enhance returns where necessary. Assets are recycled to release capital as opportunities present themselves and we will continue to buy back shares where appropriate. The group is content to hold cash and adopt a patient strategy unless there is a compelling reason to invest.

Position of company at the year end

The Group maintained its strong position at the year end with good underlying earnings, positive cash flow and investment property values showing signs of some recovery. The development pipeline is also starting to show signs of progress and we expect to commence construction at several locations within the next twelve months. The balance sheet also remains strong with cash of £31.6 million and bank debt of £70.5 million giving a net gearing of 25.1%. The Group has adequate resources to maintain and develop its business whilst managing downside risk and the balance sheet is robust.

Events since the balance sheet date

There were no significant events since the balance sheet date.

Summary of Group Net Assets

The Group net assets as at 30 September 2013 may be summarised as follows:

Investment properties

Summary of portfolio

Asset management

At 30 September 2013, the contracted rent for the investment property portfolio was £14.4 million with an ERV of £16.9 million, the reduction from 2012 being mainly attributable to property disposals in the year. The ERV of vacant space is £2.8 million of which Geoffrey House, Maidenhead; Blackpole Trading Estate, Worcester; Advantage, Reading and Brunswick Point, Leeds account for the majority. The overall vacancy rate in the portfolio is 16.70% up from 10.40% in 2012, the increase arising from expiring leases at Maidenhead and Worcester that were not renewed. These are being addressed as priorities for the management of the portfolio with a number of options available. The average unexpired lease length increased to 4.80 years from 4.50 years at 30 September 2012, mostly due to lease renewals and new lettings in the period.

Whilst tenants remain under pressure, there has been good progress on asset management and there are signs of improving sentiment in the occupier market with a considerable number of enquiries received in the last few months, many of which we hope to convert to letting. We maintain good communication with tenants where leases are shortening or where breaks are impending. We are fortunate that our arrears remain low and that 95% - 97% of rent is collected within ten days of a quarter.

In terms of lettings, we agreed new lettings contributing £579,136 pa of new income at or around ERV and we agreed lease renewals retaining £1,650,560 pa of income, again at or around ERV.

The highlights include: 

· A 4 year lease extension to the Scottish Care Inspectorate at Compass House, Dundee at the existing rent of £380,000 pa in return for a twelve month rent free period. Lease expiry is now 19 April 2023.

· A five year lease extension at Ashby Park, Ashby de la Zouch let to Ceva Logistics Limited at a rent of £357,000 pa. This lease now expires on 10 July 2019.

· Two leases agreed with Amtek Investments UK Limited at Freebournes Drive, Witham at a total rent of £420,000 pa. These leases expire on 3 June 2022 and are subject to a twelve month rent free period.

· Letting the 2nd floor and part 3rd floor at Advantage, Reading to Acquia at a rent of £149,047 pa. This is a five year lease subject to a sixteen month rent free period.

· Creating a single unit from three previous units at York House, Felixstowe and letting it to Poundland at a rent of £120,000 pa. This new lease is for a ten year term subject to a twelve month rent free period.

Disposals

The Group disposed of six investment properties during the year at Crystal Drive, Oldbury; Brook Point, Whetstone; Simpson Parkway, Livingston; and 3 buildings at The Links, Warrington. Total net sale proceeds were £12.7 million, generating a small loss to valuation of £307,000 mostly attributable to professional and other sale fees. We will continue to dispose of assets as opportunities arise and where no further value can be added by the Group.

Valuation

The investment property portfolio has been independently valued by Jones Lang LaSalle at £164.8 million as at 30 September 2013. The investment property portfolio increased in value by 0.4% on a like for like basis, however the valuation increased by 2% from the half year recovering losses in that period which is an encouraging sign. The investment property market outside central London appears to have recovered slightly and sentiment has improved, which we hope will translate into increased value. Assets require active management to protect income and value and we are seeing an increase in potential transactions which must be a positive sign.

Capital Expenditure

We incurred £1 million of capital expenditure during 2013, which was fully financed from our existing cash flow. We are undertaking refurbishment of some of the space within the Edinmore portfolio, in particular at Norfolk House, Birmingham where, having refurbished the vacant 2nd floor, we are looking at refurbishing the 3rd floor. We are also carrying out small refurbishments of space elsewhere to optimise the chances of letting. We are also resurfacing the car park at the Brunel Centre, Bletchley at a cost of approximately £600,000, although Sainsbury's have agreed to contribute 30% of the cost as part of our joint arrangements with them. Whilst there will always be a level of refurbishment work required throughout the portfolio, as at 30 September 2013 the Group had no contractual capital expenditure commitments in excess of £1,000,000.

Development projects

Haverfordwest

We submitted a planning application for our development at Haverfordwest, Pembrokeshire to build 835 residential properties and a 60,000 square feet Sainsbury's retail food store and in September 2013, the Council resolved to grant planning permission which will be formally granted upon the signing of a section 106 agreement and planning conditions. We can now work upon the detail of finalising the infrastructure and associated conditions to enable the conditional sale of the 9 acre site to Sainsbury's to complete. Whilst the final terms of that agreement must remain confidential, the receipt from the Sainsbury's sale will enable us to complete all the infrastructure works on the entire site and provide a catalyst to residential development.

In addition, we are continuing to work upon the project to re-develop the riverside area of the town centre, creating a further 74,000 square feet of mixed use space.

Holyhead Waterfront

We have planning permission for this project which includes plans for 326 apartments and townhouses, a 500 berth marina, 50,000 square feet of retail, leisure, restaurants, hotel and office space, with a very flexible design layout, in a prime location overlooking the marina. We are also making a provision for various local amenities and visitor attractions. The site covers in excess of half a mile of water frontage and is being developed jointly with Stena Line Ports Limited.

We are close to finalising the section 106 planning agreement and planning conditions. We continue discussions with various parties with respect to both the residential and commercial elements of the scheme. The undoubted boost to the local economy provided by the recent commitment of Hitachi to develop the multi-billion pound new Wylfa nuclear power station will certainly help our scheme.

Parc Cybi Business Park, Holyhead

We continue to market our logistics development site at Parc Cybi, and we are in discussions with several potential occupiers.

The logistics development comprising 140,000 square feet of office and distribution warehousing will be complemented by our plans to create a transport hub and 200 space lorry park facility to support the port of Holyhead on an adjacent 14 acre site for which we have now obtained planning consent. We have entered into an agreement with the Welsh Government for the grant of a 999 year lease over 14 developable acres for the truck stop, logistics depot and service units. We have also exercised an option to acquire a further 12 acres of land for the distribution warehousing and offices and hold an option on a further 5 acres for a logistics hub.

Fishguard Waterfront

The main elements of the scheme include a 450 berth marina with workshops, stores and ancillary facilities; 253 new residential apartments incorporating extensive landscaped gardens and a 19 acre platform for the potential expansion of the existing Stena Line port. We are refining the design and layout of the platform which produces significant capital cost savings.

We have finalised the section 106 planning agreement with the local authority, which should be signed shortly. Negotiations continue with the various landowners; Stena Line, Pembrokeshire County Council and The Crown Estate, who own the relevant surrounding harbour area. We continue to pursue the availability of EU backed Welsh Government infrastructure funds which would greatly improve the viability of the development from a funding perspective.

Fishguard Lorry Stop and Distribution Facility

This 11 acre lorry stop and distribution park project consists of a secure 24 hour truck stop together with approximately 190 spaces for tractor and trailers, vehicle refuelling and wash facilities, plus an amenity building. There will also be around 30,000 square feet of industrial and warehousing units to support the lorry stop. Planning consent has been obtained and the necessary site acquired. Discussions continue with both hauliers and the port operator, Stena Line. It remains our intention to commence development once we have secured sufficient pre-lets.

Pembroke Dock Waterfront

In May 2013, we announced that conditional contracts had been exchanged with Marston's to sell 0.7 acres at Pembroke Dock for a family pub and restaurant. An important and encouraging first step in the post-planning phase, it has generated interest from other commercial and retail operators in the site.

We have also commenced test drilling and engineering works in the harbour which is another step towards construction. Finally, we continue to negotiate with the Welsh Government with respect to EU based infrastructure funding support.

King's Lynn, Norfolk

This 6 acre residential development opportunity has planning permission for 94 dwellings near to King's Lynn, Norfolk. In addition to the residential development, the site offers some potential for mixed or commercial uses, subject to planning.

Others

We have been appointed by Conwy Council, North Wales as their preferred developers to explore the possibility of providing a 90,000 sq ft supermarket on the Council's land at Llandudno Junction.

Summary of Development Projects

The expenditure in the year on our development land bank amounted to £1.4 million. Our total investment to date is now £32.2 million at cost (analysed below) or 36.3p per share. We will continue to progress these projects in a risk-averse manner and to avoid any speculative development. To date, we have had good success in securing planning consents and several of the projects are beginning to advance. In particular, we are pleased at the potential success at Haverfordwest but also at the improved signs of activity elsewhere.

We remain on target to deliver projects comprising more than 2,000 homes (of which 1,200 are waterside), 1,400 marina berths and in excess of 400,000 square feet of commercial and retail development.

As previously stated, it is our intention to introduce third party valuations as soon as it is practical to do so. We remain confident that there is significant upside in these projects which will become evident over the medium term.

Financial review

Net Asset Value

The net asset value at the year end was £155.1 million (2012: £154.0 million) representing a 0.7% increase in the period. The primary movements were £12.9 million net rental income and £3.9 million spent on purchasing own shares. Excluding the amounts incurred purchasing own shares and paying dividends, net asset value increased 4% in the year.

On an EPRA basis, the net asset value is:

The EPRA net asset value is calculated on a fully diluted basis and excludes the impact of hedging instruments as these are held for long term benefit and not expected to crystallise at the balance sheet date.

The NNNAV or "triple net asset value" is the net asset value taking into account asset revaluations, the mark to market costs of debt and hedging instruments and any associated tax effect. Our investment properties are carried on our balance sheet at independent valuation and there is no associated tax liability. Our development and trading assets are carried at the lower of cost and net realisable value. We have not sought to value these assets as, in our opinion, they are at too early a stage in their development to provide a meaningful figure, so cost is equated to fair value for these purposes. On this basis, there is no material difference between our stated net asset value and NNNAV.

Revaluation

The Group's investment properties were independently valued by Jones Lang LaSalle as at 30 September 2013. In their opinion, the open market value of the investment property portfolio was £164.8 million. The total portfolio increased in value by £0.7m over the year.

Cash flow

The Group generated £3.3 million cash in operating activities (2012: £4.1 million generated), of which £1.0 million was incurred as expenditure on development and trading properties.

The Group generated a further £12.7 million cash from the sale of investment properties, spent £1.3 million on the acquisition of investment properties, drew down £11 million and repaid £21.4 million in bank loans and spent £3.9 million on the purchase of own shares resulting in an overall cash inflow of £0.1 million during the year.

Net Income From Property Activities

Administrative Expenses

The administrative expenses for the year ended 30 September 2013 were £2.7 million, an increase of 10.8% from the previous year. The primary reasons for this are certain increased costs in respect of marketing together with some additional staff costs. The majority of other costs arise as a result of the Group being quoted on AIM with no significant changes in 2013.

Financing

At 30 September 2013, the Group had cash of £31.6 million. The Group also has unutilised facilities of £20 million with Lloyds Banking Group.

The bank debt at 30 September 2013 was £70.5 million. The gearing is 45.5% and loan to value is 42.8% excluding cash.

The interest rate risk on the facility continues to be managed by way of interest rate swaps and interest rate caps. Aside from reducing the on-going interest rate charge in the income statement, all of our external bank debt is fully hedged and the weighted average cost of all debt including margin is 4.2%. The fair value of these derivative financial instruments is provided for in full on the balance sheet. As at 30 September 2013, 100% (2012: 100%) of the Group's bank borrowings were hedged.

The finance costs for the year amounted to £3.7 million (2012: £3.3 million), primarily consisting of £3.1 million bank loan interest (2012: £2.7 million). Finance income amounted to £0.5 million (2012: £0.1 million) reflecting the low returns on short term cash deposits. As a matter of policy, the Group retains instant access to all cash deposits so it is readily available for use in the business.

As at 30 September 2013, TAPP Property Limited maintained a facility with Lloyds Banking Group of up to £78,000,000 (2012: £78,000,000) under which £41,058,000 (2012: £49,387,000) had been drawn down. This facility is repayable on or before 27 January 2015 and is secured by fixed and floating charges over the assets of the TAPP Property Limited group and the Lamont companies. The facility is subject to a maximum loan to value covenant of 70% and an interest cover ratio covenant of 150%.

As at 30 September 2013, Conygar Dundee Limited, Conygar Hanover Street Limited, Conygar Stafford Limited and Conygar St Helens Limited jointly maintained a facility with Barclays Bank PLC of up to £19,212,000 (2012: £20,000,000) of which £19,212,000 (2012: £20,000,000) had been drawn down. This facility is repayable on or before 20 August 2016 and is secured by fixed and floating charges over the assets of Conygar Dundee Limited, Conygar Hanover Street Limited, Conygar Stafford Limited and Conygar St Helens Limited. The facility is subject to a maximum loan to value covenant of 58% and an interest cover ratio covenant of 225%.

In April 2013, we secured a refinancing of the TOPP portfolio with an £11 million loan from The Royal Bank of Scotland, of which £10,242,000 was outstanding at 30 September 2013. This facility is repayable on or before 3 April 2016 and is secured by fixed and floating charges over the assets of the TOPP Property Limited group. The facility is subject to a maximum loan to value covenant of 55%, interest cover ratio covenant of 225% and a debt to rent cover ratio covenant of 7:1.

As at 30 September 2012, TOPP Property Limited maintained a facility with Capita of £35,267,000 of which £11,538,000 had been drawn down. This facility was repaid in full on 18 January 2013.

Taxation

The tax charge for the year of £1.5 million on the pre-tax profit of £7.7 million represents an effective tax charge of 19% (2012: 24%). Tax is payable at the full UK corporation tax rate of 23.5% on net rental income after deduction of finance costs and administrative expenses. There is no tax payable in respect of investment property capital gains or any valuation uplift, which is the main reason for the low effective tax rate in the current year.

Capital management

Capital Risk Management

The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

While the Group does not have a formally approved gearing ratio, the objective above is actively managed through the direct linkage of borrowings to specific property. The Group seeks to ensure that secured borrowing stays within agreed covenants with external lenders.

Treasury Policies

The objective of the Group's treasury policies is to manage the Group's financial risk, secure cost effective funding for the Group's operations and to minimise the adverse effects of fluctuations in the financial markets on the value of the Group's financial assets and liabilities, on reported profitability and on the cash flows of the Group.

The Group finances its activities with a combination of bank loans (£70.5 million), cash and short term deposits (£31.6 million). Other financial assets and liabilities, such as trade receivables and trade payables, arise directly from the Group's operations. The Group may also enter into derivative transactions to manage the interest rate risk arising from the Group's operations and its sources of finance. Derivative instruments may be used to change the economic characteristics of financial instruments in accordance with the Group's treasury policies. Interest rate swaps and interest rate caps amount to an economic hedge of £71.4 million (2012: £65.8 million) of the total loan drawdowns of £70.4 million (2012: £80.9 million) for cashflows to 20 August 2016, but no hedge accounting is used.

The management of cash and similar instruments is monitored weekly with summary cash statements produced on a fortnightly basis and discussed regularly in management and Board meetings. The overall aim is to provide sufficient liquidity to meet the requirements of the business in terms of funding developments and potential acquisitions. Surplus funds are invested with a broad range of institutions with a range of maturities up to a maximum of 180 days. At any point in time, at least half of the Group's cash is held on instant access or short term deposit of less than 30 days.

Dividend policy

The Board is pleased to recommend a final dividend of 1.5p per ordinary share in respect of the year ended 30 September 2013 to be paid on 13 February 2014 to shareholders on the register on 6 December 2013. This is an increase of 20% over last year. Our dividend policy is unchanged in that we aim to provide some income return to shareholders but for the most part retain profits for reinvestment in the business. Our primary focus is upon growth in net asset value per share.

Share buy backs

The Group has made extensive use of its share buy back authorities over the last three years utilising surplus cash not required elsewhere in the business and acquiring 34,567,819 shares at a discount to net asset value.

During the year, the Group acquired 4,009,838 ordinary shares representing 4.3% of its ordinary share capital, at a weighted average price of 96.8p per share. This cost £3.9 million and, as a result of the buy backs, net asset value per share has been enhanced by approximately 3 pence per share or 1.9%. The Group will seek to renew the buy back authority at the forthcoming AGM and will continue to utilise it as and when it makes sense to do so and certainly whenever our shares trade at a significant discount to our underlying net asset value.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 30 September 2013

All of the activities of the Group are classed as continuing.

CONSOLIDATED Statement of Changes in Equity

For the year ended 30 September 2013

Attributable to the equity holders of the Company

CONSOLIDATED BALANCE SHEET

At 30 September 2013

Company Number: 4907617

CONSOLIDATED CASH FLOW STATEMENT

For the year ended 30 September 2013

NOTES TO THE ACCOUNTS

For the year ended 30 September 2013

1. The financial information set out in this announcement is abridged and does not constitute statutory accounts for the year ended 30 September 2013 but is derived from those financial statements. The financial information is not audited. The auditors have reported on the statutory accounts for the year ended 30 September 2013, their report was unqualified and did not contain statements under sections 498(2) or (3) of the Companies Act 2006, and these will be delivered to the Registrar of Companies following the Company's annual general meeting. The financial information has been prepared using the recognition and measurement principle of IFRS.

2. The comparative financial information for the year ended 30 September 2012 was derived from information extracted from the annual report and accounts for that period, which was prepared under IFRS and which has been filed with the UK Registrar of Companies. The auditors have reported on those accounts, their report was unqualified and did not contain statements under sections 498 (2) or (3) of the Companies Act 2006.

3. Operating PROFIT

Operating profit is stated after charging:

4. PARTICULARS OF EMPLOYEES

The aggregate payroll costs of the above were:

The average monthly number of persons, including executive directors, employed by the Company during the year was nine (2012 - seven).

5. DIRECTORS' EMOLUMENTS

The board of directors comprise the only persons having authority and responsibility for planning, directing and controlling the activities of the Group.

6. OTHER GAINS AND LOSSES

7. FINANCE INCOME / COSTS

8. TAXATION ON ORDINARY ACTIVITIES

(a) Analysis of charge in the year

9. DIVIDENDS

The directors have recommended a final dividend of 1.5 pence per ordinary share in respect of the year ended 30 September 2013 (2012 - 1.25 pence). This final dividend will amount to £1,332,000 (2012: £1,160,000), if approved at the AGM. In accordance with IFRS, it has not been included as a liability in the financial statements.

10. EARNINGS PER SHARE

The calculation of earnings per ordinary share is based on the profit after tax attributable to equity shareholders of £6,211,000 (2012 - £5,647,000) and on the number of shares in issue being the weighted average number of shares in issue during the period of 90,223,107 (2012 - 100,847,230). The diluted earnings per share calculation is based on profit for the year of £6,211,000 (2012 - £5,647,000) and on 90,245,450 (2012 - 100,848,260) ordinary shares. The diluted ordinary shares are calculated as follows:

11. PROPERTY, PLANT AND EQUIPMENT

12. INVESTMENT PROPERTIES

Group

The historical cost of properties held at 30 September 2013 is £225,878,000 (2012: £244,847,000).

The properties were valued by Jones Lang LaSalle, independent valuers not connected with the Group, at 30 September 2013 at market value in accordance with the Practice Statements contained in the RICS Appraisal and Valuation Standards published by the Royal Institution of Chartered Surveyors which conform to international valuation standards. The valuations are arrived at by reference to market evidence of transaction prices and completed lettings for similar properties. The properties have been valued individually and not as part of a portfolio and no allowance has been made for expenses of realisation or for any tax which might arise. They assume a willing buyer and a willing seller in an arm's length transaction. The valuations reflect usual deductions in respect of purchaser's costs and SDLT as applicable at the valuation date. The independent valuer makes various assumptions including future rental income, anticipated void cost, the appropriate discount rate or yield.

The Group has pledged £91,305,000 (2012 - £102,550,000) of investment property to secure Lloyds Banking Group debt facilities, £30,575,000 (2012 - £31,805,000) to secure Royal Bank of Scotland debt facilities and £42,875,000 (2012 - £42,360,000) to secure Barclays Bank PLC debt facilities. Further details of these facilities are provided in note 27.

The property rental income earned from investment property, which is leased out under operating leases amounted to £15,994,000 (2012 - £16,187,000).

Sensitivity Analysis:

Movement in equivalent yield

If the equivalent yield compresses by 0.5% to 8.49% then the portfolio valuation increases by approximately 6.3%. It reduces by approximately 5.7% if the equivalent yield increases by 0.5% to 9.49%.

Movement in ERV

If ERV's increase by 5% then the portfolio valuation increases by approximately 4% whilst falling by approximately 3.9% if ERV's decrease by 5%.

Voids

If the void periods assumed in the valuation are decreased by 6 months then the portfolio valuation would increase by approximately 1.9%. If void periods increase by 6 months then the portfolio valuation would decrease by approximately 1%.

Material Contractual Obligation

At 30 September 2013, TOPP Bletchley Limited was jointly obligated with Sainsbury's to resurface the car park at the Brunel Centre, Bletchley at a cost of approximately £600,000.

13. INVESTMENTS

Joint Ventures

The Group has a 50% interest in a joint venture, Conygar Stena Line Limited, which is a property development company. It also has a 50% interest in a joint venture, CM Sheffield Limited, which is a property trading company.

Loans to Joint Ventures

In accordance with IAS 19, the loans to joint ventures have not been disclosed separately on the balance sheet as the investments in joint ventures are net liabilities when the loans are excluded.

The following amounts represent the Group's 50% share of the assets and liabilities, and results of the joint ventures. They are included in the balance sheet and income statement:

There are no contingent liabilities relating to the Group's interest in joint ventures, and no contingent liabilities of the ventures themselves.

14. FIXED ASSET INVESTMENTS

Subsidiaries

The principal companies in which the Company's interest is more than 10% are as follows:

* Indirectly owned

15. GOODWILL

The goodwill arose upon the acquisition of the non-controlling interests in Martello Quays Limited and represents the excess of the consideration over the fair value of the identifiable net assets acquired. The goodwill has been wholly allocated to the development project within Martello Quays Limited, which is considered to represent a single income and cash generating unit. Management analysis indicates that the net present value of the project exceeds its carrying value and therefore no impairment is appropriate.

IFRS requires management to undertake an annual test for impairment of indefinite lived assets, such as goodwill, and to test for impairment if events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Impairment testing is an area involving management judgment, requiring assessment as to whether the carrying value of the assets can be supported by the net present value of future cash flows derived from such assets using cash flow projections which have been discounted at an appropriate rate. In calculating the net present value of the future cash flows, certain assumptions are required to be made in respect of highly uncertain matters including management's expectations of:

- Timing and quantum of future capital expenditure;

- Timing and quantum of future revenue streams; and

- The selection of discount rates to reflect the risks involved.

The Group prepares and approves formal five year forecasts for Martello Quays Limited which are used in the value in use calculations. Five years is considered to be the optimum period for a meaningful forecast and takes into account available sources of both internal and external information. The Group's review includes the key assumptions related to sensitivity in the cash flow projections.

The impairment review is based upon value in use calculations. The period of review is five years and it is assumed that no growth occurs over the period. A range of pre-tax risk adjusted discount rates (5-15%) were used in order to reflect inherent uncertainties and to produce a sensitivity analysis.

Key assumptions used in value in use calculations

- Valuation of completed construction

The valuation of the completed construction is based upon current knowledge of the local market utilising both internal and external sources of information and evidence.

- Budgeted capital expenditure

The cash flow forecasts for capital expenditure are based upon on past experience and estimates provided from both internal and external sources.

- Pre-tax risk adjusted discount rate

The discount rate applied to the cash flows is generally based upon the risk free rate for ten year government bonds adjusted for a risk premium to reflect the systematic risk of the project, likely cost of funding and underlying uncertainties.

Sensitivity to changes in assumptions

Management believes that no reasonably possible change in any of the above key assumptions would cause the carrying value of the project to exceed its recoverable amount.

16. TRADING INVESTMENTS

17. PROPERTY INVENTORIES

18. TRADE AND OTHER RECEIVABLES

The directors consider that the carrying amount of trade and other receivables approximates to their fair value due to the short term nature of these financial assets.

19. TRADE AND OTHER PAYABLES

The directors consider that the carrying amounts of the trade and other payables approximate to their fair value due to the short period of repayment.

20. BANK LOANS

Details of the financial liabilities are given in note 27.

21. PREFERENCE SHARES

As part of the offer for The Advantage Property Income Trust Limited, the Company issued 62,979,750 convertible preference shares of £0.01 each, of which none (2012: none) were outstanding at the year end. The preference shares were convertible at any point into ordinary shares at the option of the preference shareholder. The conversion rate was one ordinary share for five preference shares. Any preference shares not converted were redeemed for £0.25 each on 31 December 2011.

Although equity share capital at law, the preference shares were classified as hybrid instruments under IFRS consisting of a discounted debt element of £0.20 per share and an equity element of £0.02 per share which was credited to an equity reserve. A notional interest element was charged to the income statement over the period to redemption.

The movement on the preference shares during the year was as follows:

22. SHARE CAPITAL

Authorised share capital:

Allotted and called up:

Amounts recorded as liability:

The movement on the group's share capital during the year was as follows:

Allotted and Called Up